Delhi housing to be costlier, circle rates to hike by 20 per cent

Property registration could soon burn a substantially bigger hole in your pocket, with the Delhi government gearing up to increase circle rates by at least 20 per cent.

The revenue department is in the process of finalising a proposal to this effect and they plan to hike the rates by October. This is also bound to send real estate prices skyrocketing.

Circle rates were revised twice last year. In fact, in the previous such instance in November 2011, the government had increased the circle rates of A category colonies by a staggering 250 per cent. According to sources, the tony colonies that fall in A and B categories will experience the steepest hike this time too.

Delhi CM Sheila Dikshit has actively pushed for raising circle rates on the grounds that it is an effective method to root out black money and increase the government's revenue.

The steady upping of circle rates seeks to bridge the gap between the government rates and actual market prices. Sample this. The going rate for a 1200 square yard house at Jor Bagh is Rs 185 crore. But the existing circle rates permit such a prime piece of real estate to be registered at a minimum price of just Rs 23.65 crore.

For home buyers, the spinoff from the move is that the cheque payment component in property transactions will increase. This will facilitate those who avail themselves of home loans.

Click here to EnlargeBut Sachin Sandhir, managing director and country head of Royal Institution of Chartered Surveyors, said, "The hike will result in endusers shelling out more to buy property in Delhi at a time when the realty market is at its nadir." Principal secretary, revenue, Vijay Dev, disclosed: "The average rise in circle rates would be around 20 per cent. It will be higher in the premium areas," he revealed.

Earlier, the circle rates of categories B, C and D underwent a 100 per cent hike. The revision was around 15 per cent for resettlement colonies, J-J clusters and urban villages.

According to the existing circle rates, a category A household should cost around Rs 2.15 lakh per square metre (psm).

Even if the average expected hike of around 20 per cent is added to this amount, the new psm cost in these localities will jump to at least Rs 2.58 lakh.

Central Delhi-based real estate consultant Naveen Soni said: "Even after a further hike is effected, the circle rates in most affluent areas will be just 25-30 per cent of the actual market price." A senior DLF executive shared this view and felt that it wasn't the right step to check black money in the property market.

"Instead, the government should focus on pushing up the supply of housing units and increasing FAR (floor area ratio)," he said.

The rate for a 1,700 sq yard house at Kautilya Marg is around Rs 200 cr.

Rs 170 cr is the market price for a 1,500 sq yard house at Shanti Niketan.

A 370 sq yard house will cost Rs 35 cr at Aradhana Enclave.

Purchasing property in Delhi involves a big cash component and a smaller cheque component to save on tax. This happens because the actual circle rate â€” minimum area-wise property price set by the government to register a property â€” is significantly lower than the actual market price.

In Delhi, often the amount payable by cheque is just 25 per cent of the total price. This means people can only avail loans based on the circle rate. This makes it difficult for the salaried class to buy property in Delhi, thus forcing them to move to NCR towns where one can pay almost 100 per cent amount in cheque and avail 85 per cent loan.

Circle rates were first introduced in Delhi in 2007 to ensure that people didn't undervalue land for registration purpose. The initial segregation of colonies for circle rates was based on the Municipal Corporation of Delhi's categories for property tax calculation.

While these rates were to be revised once in every two years, controversies ensured that they were revised next only in February 2011.